Economic Crime: Key Date and a Big Fine
Businesses should avoid becoming lackadaisical as to the risk of economic crime. As a new year begins, we highlight a key deadline to note - and a fine imposed on a bank that appears not to have learned from previous mistakes.
Overseas entities register
The key deadline of 31 January 2023 has come around quickly – by which applications from overseas entities had to be submitted to Companies House for registration. Registration on the new, publicly available register is legal required if the non-UK entity owns certain types of property registered at the UK’s land registries (or intend purchasing such property).
Many have yet to apply – in spite of the threat of criminal sanctions for noncompliance. In January, the government sent a second letter to overseas entities who have not yet registered and who, according to HM Land Registry, own or lease UK land and property. (Note that foreign individuals are unaffected by the new requirements).
The requirements imposed by the Economic Crime (Transparency and Enforcement) Act 2022 have been introduced as part of the drive to combat economic crime, particularly the opaque ownership of UK property by foreign criminals and Russian oligarchs. Transparency is increasingly important.
HM Land Registry (England and Wales) has entered restrictions on the majority of titles registered to overseas entities. The effect is that from 1 February, any registration of a transfer, legal charge or lease for more than 7 years is prohibited - unless the entity was registered on the Companies House register at the time of the transaction (or other exception applies).
Failure to comply with the requirements could lead to prosecution against both the entity itself and its officers. A fine and/or imprisonment of up to 5 years could be imposed on conviction.
£7.7m fine for breaches
Just a few days into the new year, a bank was fined almost £7.7m by the Financial Conduct Authority for anti-money laundering failings over a period of nearly five years. The fine should be a prompt to both regulated and unregulated financial services firms to ensure they take their AML responsibilities seriously.
Guaranty Trust Bank (UK) Limited was given the fine for serious weaknesses in its AML systems and controls. Its failings included not undertaking adequate customer risk assessments, not assessing or documenting the money laundering risks posed, and failing to monitor customer transactions and business relationships to the required standard.
This was in spite of repeated warnings by internal and external sources, including the FCA, of its weaknesses and failing to take appropriate remedial action. Concerningly, the bank had been fined previously, in 2013, for similar failings - a fact that was reflected in the size of the penalty.
The bank agreed to an early resolution qualifying for a 30% discount – had it not done so the fine would have been just shy of £11m. The FCA has emphasised the key role regulated firms play in the UK’s fight against financial crime. They must have effective, proportionate and risk-based systems and controls in place to mitigate the risk of their businesses being used for money laundering or terrorist financing.
Non-regulated firms also have an important role to play in tackling money laundering. While they are not subject to the same reporting obligations of regulated firms, they do have a statutory duty (under the Terrorism Act 2000) to report beliefs or suspicions arising in the course of their business or employment.
They can further protect themselves in various ways, including by way of submitting a suspicious activity report (SAR). Specialist advice about how you can better protect your business from the risks of economic crime should be taken.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you